Nevada City considers moratorium on some cannabis manufacturers

Citing safety concerns, the Nevada City Police Department asked the city council on Wednesday to consider a moratorium on cannabis manufacturing businesses that use volatile extraction methods.

Local cannabis business owners argued against the request, telling council members the industry is highly regulated and cannabis should not be singled out. In the end, the council shelved the discussion until city staff could become better educated on the ins and outs of the issue.

The issue arose because edibles, tinctures and oils, which are made with cannabis extract, comprise a large part of the legal cannabis industry's sales, and are increasing in popularity. To extract the active ingredients from whole marijuana flowers, chemical solvents are used that are often flammable and potentially dangerous if used improperly during the extraction process.

Volatile method

Butane, a volatile extraction method, has been linked to a number of honey oil lab explosions in Nevada County, most recently in June 2017.

California split the activity of cannabis manufacturing into categories, distinguished by whether or not they used "volatile solvents," and placed differing restrictions on the two categories. Initially, the state categorized ethanol extraction as volatile, then changed it to non-volatile.

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But because the issue was still up in the air when Nevada City formulated its cannabis permit process, the city decided to allow both volatile and non-volatile businesses, City Manager Catrina Olson explained. Currently, there are two pending cannabis permits in Nevada City in the volatile license category: Sky Farms and The Searls Group.

"Further research and education revealed the dangers of the volatile extraction method," Olson said in her staff report, adding that a moratorium on any further issuance of such permits "may be in the best interest of the city."

Permits

City Planner Amy Wolfson clarified that Sky Farms and The Searls Group have not yet received their permits, but are working through that process.

"We are not asking to revoke their permits," she said.

Those arguing against the moratorium made clear the distinction between illegal cannabis extraction labs operating in people's homes and the legal permitted businesses that use expensive closed-loop systems to process cannabis.

Emerald Bay Extracts, for example, which is currently operating on New Mohawk Road, has passed all its inspections for its ethanol extraction system, said Thrive Society cofounder Basil McMahon.

Nevada County Cannabis Alliance director Diana Gamzon pointed out that many businesses use very similar volatile processes, including dry cleaners, gas stations and manufacturers of essential oils. A moratorium on cannabis extraction alone would be unfair, she argued.

"You've all used products this year extracted with a volatile process, I'm sure," Floracy founder Harry Bennett told the council members. "It's a common method."

Bennett said volatile extraction's dangers can be easily mitigated, adding that his company wants to expand into volatile extraction and plans to apply for that license.

Joe Bundy, one of the owners of The Searls Group, told the council his company is still working on build-out, adding, "Getting up to speed in an ever-changing industry is not easy."

He offered to have his facility's design team make a presentation to the city to explain the stringent requirements being met. Jonathan Hogander of dispensary Elevation 2477' made a similar pitch, saying he would be happy to host a tour of the Blessed Extracts facility in Davis, which uses volatile extraction methods.

Elevation 2477' CEO Daniel Batchelor told the council members that 55 of the 251 products the dispensary carries are made with volatile extraction.

"I want to be locally sourced," he said.

Volatile extraction sounds "scary," Batchelor acknowledged, but urged the council to continue to allow legal permitted businesses in order to "get it out of people's garages."

Nevada City Police Lt. Chad Ellis continued to push for the moratorium, telling the council members staff need more education on the potential hazards. He pointed out Sky Farms' permit is currently being held up because two of the principals are under criminal investigation after a cannabis oil alcohol distillation lab was reportedly found on their property.

"We need to wait for the outcome of that investigation," said council member Erin Minett, adding she did not feel she had enough information to support a moratorium.

Staff was directed to become more conversant with volatile extraction of cannabis, and the discussion was postponed until the council's next meeting.